Consti - Slower start to the year expected
Consti reports its Q1/24 results on 25th of April. We expect continued sales decline during the seasonally slow Q1 as a result of the strong comparison period Q1/23 and lower order intake during H2/23.
Focus is on orders and backlog during seasonally slow Q1
Consti’s Q1 typically represents roughly one fifth of total annual sales and only 5% of EBIT due to seasonality. Our interest in the Q1 report lies in order intake and backlog development in addition to possible comments on the market development. The Confederation of Finnish Construction Industries RT expects continued decline for renovation construction volumes during 2024 in its latest report. The volume decline is expected to slow down from last year as renovation volumes are estimated to decline by 1% while in 2023 volumes declined by 4%.
Minor downward estimate revisions
Consti’s order intake fell roughly 22% short of the comparison period during H2/2023, while for FY 2023, order intake declined 1.3% y/y. In absolute terms, Consti expects that a larger part of 12/2023 backlog will be recognized during 2024 when compared to last year. On the other hand, in relative terms, the current backlog is more evenly distributed to following years when compared to 12/2022 backlog. We expect the revenue decline seen during Q4/23 to have continued during the first quarter. We now estimate net sales of EUR 64.5m (prev. EUR 66.4m) for Q1 with EBIT of EUR 0.5m (prev. EUR 0.5m). For FY 2024, we estimate net sales of EUR 315.5m with a sales decline of 1.6% y/y. Driven by the decline in net sales, we estimate EBIT of EUR 10.8m (EUR 12.3m 2023) with a margin of 3.4% (3.9% 2023).
Current valuation offers a margin of safety
Despite the expectation of a slower year ahead, we find Consti’s current pricing conservative. Consti trades at a discount of roughly 30% based on 24-25E P/E and EV/EBIT when compared to its main construction and building technology and service peers. Even with the guidance range low, EBIT of EUR 9m, the current pricing would offer a substantial discount to peers and the company’s historic multiple levels.
Consti’s Q1 typically represents roughly one fifth of total annual sales and only 5% of EBIT due to seasonality. Our interest in the Q1 report lies in order intake and backlog development in addition to possible comments on the market development. The Confederation of Finnish Construction Industries RT expects continued decline for renovation construction volumes during 2024 in its latest report. The volume decline is expected to slow down from last year as renovation volumes are estimated to decline by 1% while in 2023 volumes declined by 4%.
Minor downward estimate revisions
Consti’s order intake fell roughly 22% short of the comparison period during H2/2023, while for FY 2023, order intake declined 1.3% y/y. In absolute terms, Consti expects that a larger part of 12/2023 backlog will be recognized during 2024 when compared to last year. On the other hand, in relative terms, the current backlog is more evenly distributed to following years when compared to 12/2022 backlog. We expect the revenue decline seen during Q4/23 to have continued during the first quarter. We now estimate net sales of EUR 64.5m (prev. EUR 66.4m) for Q1 with EBIT of EUR 0.5m (prev. EUR 0.5m). For FY 2024, we estimate net sales of EUR 315.5m with a sales decline of 1.6% y/y. Driven by the decline in net sales, we estimate EBIT of EUR 10.8m (EUR 12.3m 2023) with a margin of 3.4% (3.9% 2023).
Current valuation offers a margin of safety
Despite the expectation of a slower year ahead, we find Consti’s current pricing conservative. Consti trades at a discount of roughly 30% based on 24-25E P/E and EV/EBIT when compared to its main construction and building technology and service peers. Even with the guidance range low, EBIT of EUR 9m, the current pricing would offer a substantial discount to peers and the company’s historic multiple levels.